Everyone should be given an annual carbon ration and face financial penalties if they exceed it, under a proposal by the Environment Agency.

Lord Smith of Finsbury, the agency’s chairman, will say today that rationing is the fairest and most effective way of meeting Britain’s legally binding targets for cutting greenhouse gas emissions.

People would be given a “carbon account” and a unique number that they would have to submit when making purchases of carbon-intensive items such as petrol, electricity or airline tickets. As with a bank account, people would receive statements showing the carbon weight of each purchase and how much of their ration remained.

If they used up their ration within a year, they would have to buy extra credits from those who had not used their full allowance.

Lord Smith, who was Culture Secretary in Tony Blair’s Government, believes that the system would encourage people to think about the carbon cost of their purchases as well as reward those who lived frugally and did little travelling, who could make a significant profit from selling their unused credits.

Speaking at the agency’s annual conference in London, Lord Smith will say that carbon rationing would help people to “judge how they want to develop their own quality of life in a sustainable way”.

He believes that rationing would be fairer than taxing carbon because extra taxes could make certain activities, such as flying, too expensive for people on low incomes. If everyone had an equal free carbon allowance, the basic cost of flying would remain cheap but those who flew a lot would quickly use up their ration and have to purchase extra carbon credits for each additional flight.

Under the Climate Change Act, Britain is obliged to cut its emissions by 80 per cent on 1990 levels by 2050. This means annual CO2 emissions per person will have to fall from about 9 tonnes to only 2 tonnes.

Rationing would make it much easier to meet the target because the total amount of permitted emissions under the Act would simply be divided by the size of population.

The Department for Environment, Food and Rural Affairs published a feasibility study last year which found that rationing was technically feasible and could be effective in cutting emissions.

Defra said at the time: “The study indicates that personal carbon trading has potential to engage individuals in taking action to combat climate change.” However, it said that the idea was “ahead of its time” and would be very expensive to implement.

The statement concluded: “The Government remains interested in the concept of personal carbon trading and, although it will not be continuing its research programme at this stage, it will monitor the wealth of research focusing on this area and may introduce personal carbon trading if the value of carbon savings and cost implications change.”

The House of Commons Environmental Audit Committee called on the Government last year to resume research on a rationing scheme and to be “courageous” in seeking to overcome likely public hostility to the idea.

It said in a report: “Opposition to personal carbon trading could be reduced if the public could be convinced of three things. First, that it is absolutely essential to reduce emissions; second, that this can only be achieved if individuals take personal responsibility for reducing their own emissions; and third, that personal carbon trading is a fairer and more effective way of reducing personal emissions than alternatives such as higher taxes.” The committee concluded: “Widespread public acceptance, while desirable, should not be a pre-condition for a personal carbon trading scheme; the need to reduce emissions is simply too urgent.”

David Miliband, the Foreign Secretary, called for a “thought experiment” on carbon rationing when he was Environment Secretary in 2006.